Preamble
Reference of the Bill and Inquiry
Committee Inquiry
Summary of the Committees Findings and
Conclusions
Findings
Conclusions
Parity pricing
Recommendation by the Committee
The Customs Tariff Amendment Bill (No.2) 1997 (No. 3)
(the Bill) was referred to the Committee by the Senate on 4 September 1997 for inquiry and
report.
The reference followed recommendation by the Selection of Bills
Committee that the Bill be referred to this Committee for consideration.
The Committee was due to report to the Senate on its inquiry into
the Bill by 22 October 1997. Following hearings on the Bill in Brisbane on 10 October, the
Committee resolved to seek from the Senate an extension of time to 10 November, 1997 to
report on the inquiry.
The Senate granted this extension of time.
The Committee also sought, and was granted a further extension of
time to 17 November 1997 to report.
The reference of the bill listed as the principal issues for the
Committee's consideration:
Provisions of the bill relating to the removal of the customs duty
from sugar and certain sugar by-products and the potential impact this
could have on the viability and survival of sugar cane farmers.[1]
In complying with the Senate's request in regard to the Bill,
the Committee sought the views of representatives of all principal participants in the
sugar industry: growers, millers, refiners and manufacturers as to the effect the removal
of the tariff would have on participants in the industry, with an emphasis on the effect
of removal on canegrowers.
The Committee also invited a number of individual Senators
interested in the Bill and Members of Parliament representing electorates in which the
sugar industry is concentrated to put their views.
In response to the Committee's invitation, 15 written submissions on
the Bill were received by 3 October 1997.
The list of submissions received by the Committee is in Appendix 1.
The Committee was briefed by the Department of Primary Industries
and Energy on 29 September 1997.
The Committee held two public hearings on the Bill: on 10 October
1997 in Brisbane, and in Canberra on 30 October 1997.
A full list of witnesses who gave evidence at the Committee hearings
is in Appendix 2.
The Committee addressed the inquiry into the Bill on the basis that the
future of the Australian sugar industry was assessed by the Sugar Industry
Review Working Party (the SIRWP) which reported to the Queensland and
Commonwealth Governments in November 1996.[2]
The recommendation made by the SIRWP on the sugar tariff was as
follows:
The Working Party recommends the removal of the sugar tariff. Furthermore,
it strongly recommends the strengthening of Australia's anti-dumping
measures to provide protection for industry producers. Removal of the
tariff will ensure domestic refiners and industrial users have access
to sugar at world market prices. The implementation of this recommendation
is expected to result in a decline in raw sugar industry revenues of
$26.7 million annually. On the other hand, there will be corresponding
benefits to other sectors of the economy.[3]
The Committee's inquiry has found that dispute over the
impact of the removal of the tariff on canegrowers has resulted in two important factors
being made clear to the Committee: (i) that there is a clear connection between the tariff
removal and agreement for the retention of Single Desk Selling (SDS) of Australian raw
sugar: and (ii) that the level of the tariff has for some time been a component for fixing
a price which canegrowers will receive for sugar sold into the Australian domestic market
(some 15% of the total Australian raw sugar crop). Both these factors were the subject of
close and detailed examination by the SIRWP.
A further factor brought to the Committee's attention is the effect
removal of the tariff had on an aspect of competition on the sugar refining industry. The
removal of the tariff as from 1 July 1997 was paramount in the decision by the Australian
Competition and Consumer Commission (ACCC) to reverse its 1993 opposition on the merger
between the two sugar refiners, CSR and Mackay Sugar, and to subsequently agreeing to the
merger proceeding. (A copy of the ACCC reasons for this decision are attached as Appendix
3.)
In fact, when the Chairman of the ACCC, Professor Alan Fels, was
questioned on this reversal by the Committee, there did not appear to be any other major
sugar-related matter - other than the tariff - which influenced the ACCC decision.
Professor Fels also told the Committee that if the tariff was reinstated the ACCC would
have no option but to revisit the merger.
The Committee is of the view that if the tariff was reinstated,
approval for the merger to go ahead would be reversed. This would do immense damage to the
sugar industry because of the current overcapacity existing in the Australian sugar
refining industry would continue. This would mean significant losses would continue to
occur.
Discussion and analysis of the submissions and views canvassed by
the Committee during the hearings on the Bill are dealt with in Chapter 2 of this report.
The Committee's conclusions are directed at the effect that the
removal of the tariff will have on the Australian canegrowing industry.
The removal of the sugar tariff is a central element in the SIRWP
conclusions and recommendations to both the Commonwealth and Queensland Governments on the
future of the Australian sugar industry. (Particularly see the SIRWP Report Sugar -
Winning Globally, recommendations) Both Queensland and Commonwealth Governments have
accepted the SIRWP recommendations and proposals for the sugar industry and undertaken to
implement them.
In relation to one matter, parity pricing, the Committee comments
specifically.
Discussions that the Committee held on this issue during its
hearings indicated that the policy of import parity pricing (whereby the price of sugar
sold for use in the Australian domestic sugar market was priced at world price plus the
tariff plus a transport and costs element) ceased at the same time as the removal of the
tariff. The Committee is convinced that adoption of export parity pricing of sugar sold
for use in the Australian domestic sugar market will mean that sugar could expect to be
domestically priced at a lower price than in the past.
Witnesses appearing before the Committee advanced differing views on
what effect restoration of import parity pricing might have on sugar prices, and
consequent returns to canegrowers and prices to consumers.
The Committee has concluded that a return to a policy of import
parity pricing would in fact provide a much more equitable position relative to imports
coming to Australia. It certainly would modify the impact of removal of the tariff and the
other recommendations such as the consolidation of the number one and number two pools
into one pool and not be anti-competitive. (Refer Chapter 2).
Whilst this question is outside the terms of reference given to the
Committee on the Bill, the Committee recommends to the Minister for Primary
Industries and Energy that discussions be held with the Queensland Government for
consideration of possible implementation of notional import parity pricing.
The Committee has considered that part of the Customs Tariff
Amendment Bill (No. 2) 1997 (No. 3) relating to removal of existing tariff on sugar and
sugar by-products and recommends that the Bill be passed without amendment or
request when it is introduced into the Senate.
Senator Winston Crane
Chairman, Legislation Committee
17 November 1997
Footnotes:
[1] Senate Selection of Bills
Committee, Report to the Senate - No 13 of 1997, 4 September 1997,
Appendix 3.
[2] `Sugar - Winning Globally',
Report by the Sugar Industry Review Working Party 1996 (SIRWP Report)
, Mr Bruce Vaughan, AO, Chairman. Department of Primary Industries,
Queensland. Brisbane, 1996
[3] SIRWP Report, Summary -
`Tariff on raw and refined sugar', p. 2.